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Greens propose carbon tax, tax cut package

Sunday 1 Jun 2014 1:18 p.m.

By 3 News online staff with Brook Sabin

The Green Party wants to introduce a carbon tax to replace the troubled Emissions Trading Scheme.

Green Party co-leader Russel Norman admits that putting a price on carbon emissions will raise some costs for consumers, but he says that these will be outweighed by a series of new tax cuts funded by the scheme.

The new policy was announced today as one of a suite of measures in a "climate action plan" aimed at getting New Zealand to carbon neutrality by 2050.

It sets the price of CO2-equivalent emissions at $25 per tonne for all sectors except agriculture.

The dairy industry would also be included in the policy – unlike under the Emissions Trading Scheme – but its emissions would be priced lower, at $12.50 per tonne. Forestry will be credited at $12.50 per tonne.

An independent analysis carried out by Business and Economic Research Ltd (BERL) forecast that the carbon tax would likely return an initial revenue stream of $1.1 billion.

The Greens plan to pass this revenue back to the public as a "Climate Tax Cut" in the form of a new income tax-free threshold of $2000, and a 1 percent cut in the company tax rate.

The BERL report found that the average household's finances would likely improve by around 0.6 percent if the policy were implemented, however the report only took into consideration the three groups of goods and services most likely to be directly affected by the tax: dairy, electricity, and fuel.

It predicted a household's annual costs in these areas would increase by $101, but this would be offset by an annual increase in after-tax income of $420 thanks to the cuts.

"We can reduce our emissions without hurting household budgets. Households will be on average $319 better off every year under the Green Party policy,” says Dr Norman.

But the report also found that dairy farms would be adversely affected by the policy.

It forecast that the carbon tax would add around 2 percent to the working expenses of the average dairy farm – and after taking into account the company tax rate reduction, it found the policy would reduce the post-tax profits of the average dairy farm by 12.5 percent.

The report said, however, that this was not enough to put dairy farms at a loss.

"At the currently projected pay-out for milk solids, even dairy farms in the lowest decile would remain well above breakeven in the face of an emissions levy."

Federated Farmers chief executive Conor English says he opposes the inclusion of the farming sector in the scheme.

"They shouldn't be trying to tax farmers. It's not going to change the weather, and it is going to put farmers under financial pressure," he says.

"It's much more extreme than I had thought. And this relentless attack on New Zealand dairying, I just can't get it because this is 24 percent of our export income," he says.

National doing 'virtually nothing' on emissions – Norman

Dr Norman says climate change is "the most challenging issue of our time", but that under the current Government's policies, New Zealand's net emissions will continue to increase.

"On a per person basis, New Zealand now produces twice the amount of greenhouse gases as China, and eight times that of India. We are the fifth highest per-person emitters in the developed world," he says.

"National's policies mean New Zealand's net emissions are set to go up by 50 percent in the next 10 years, putting us on track to be the worst performing developed country under the UN Framework Convention on Climate Change."